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TMI Blog2013 (7) TMI 1166X X X X Extracts X X X X X X X X Extracts X X X X ..... no clause in the advertisement issued by the respondents, inviting Expression of Interest (in short EOI) or, in the tender conditions, empowering the respondents to retain and/or forfeit the license fee paid by the applicants, which included the petitioner. This is one of the main issues which arise for consideration in the instant case. 1.1 As a matter of fact, it is the case of the petitioner that the respondents have discriminated qua the petitioner, in as much as, a similarly circumstanced applicant i.e., Dr. Reddy's Laboratories Ltd. (in short DRL) was allowed to not only withdraw from the process but was also refunded the license fee deposited by it. Violation of Article 14 of the Constitution is thus brought into play by the petitioner. As is expected, respondents have repelled the charge and taken the stand that the circumstances in which DRL was allowed to withdraw from the process and was refunded the license fee were quite different to that which obtained in the petitioner's case. I will be discussing this aspect of the matter in the course of my judgment. 2. As for now, it may be in order to broadly refer to the background facts, which led to the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 36A of the Narcotic Drugs and Psychotropic Substances Rules, 1985 (in short NDPS Rules) on the basis of norms set up for pre-qualification. This was the first stage of pruning. The petitioner was one such applicant, which qualified for the pre-bid conference. A communication to this effect was sent to the petitioner, on 22.06.2007. Accordingly, the pre-bid conference was held on 10.07.2007. 2.7 Fourteen (14) out of the sixteen (16) companies which had qualified, participated in the meet. At the meet, various issues concerning the applicants were discussed and minutes drawn up. The applicants were called upon to submit their technical and financial bids. The terms and conditions qua which were communicated by respondent No. 1 vide communication dated 17.08.2007. The committee finally approved the technical bids of the following four (4) applicants. The financial bids submitted by these applicants, which included the petitioner were as follows:- 2.8 It would be evident that EBPL was the highest bidder, with DRL and the petitioner being the second and third highest bidders respectively. Consequently, the committee recommended issuance of the license under Rule 36(2A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t up and the State Drug Control Authority issued a license under Rule 39. The only concession which was made by respondent No. 1 at this stage was that for the purposes of obtaining clearance from the State Drug Control Authorities, the permission to set up a factory may be treated as equivalent to a license under Rule 36. Both EBPL and DRL were however, directed to deposit the sum of ₹ 18 Crores prior to expiry of sixty (60) days i.e., 09.05.2008. 3.4 It emerges that EBPL made a request on 05.05.2008 for extension of time by further period of sixty days w.e.f. 09.05.2008. The said request was followed by yet another communication dated 06.05.2008 addressed on behalf of EBPL to respondent No. 1, for extension of time. 3.5 DRL, on its part remitted an amount of ₹ 18 Crores to respondent No. 1 under the cover of a letter dated 08.05.2008. In this communication, DRL indicated that the said payment was being made on behalf of an entity by the name of Macred India Pvt. Ltd. (in short Macred), which was the entity incorporated to implement the project. Macred was apparently, a joint venture between DRL and Johnson Matthey Group. DRL, in this communication requested GOI, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipt of payment and change in name. The petitioner, was further informed that, in line with its letter of 05.05.2008, it was required to set up a factory for manufacture of alkaloids and APIs from Indian opium within a period of three years subject to obtaining necessary clearances from the State Drug Control Authority. The petitioner, was also informed that the license under Rule 36 would be issued on submission of an application form and fulfillment of other regulatory requirements contained in the NDPS Rules as also in the Drug and Cosmetics Rules. It may be of some relevance to note that, copies of the letter dated 05.05.2008, to which reference was made, were issued, in the first instance only to EBPL and DRL as at that point in time, these were the only two companies, which had succeeded in winning the bid. 4.2 It is hereafter that, trouble started between the parties. By a letter dated 11.05.2009, respondent No. 1 called upon respondent No. 2 to seek information from the petitioner as to the steps it had taken to execute the project. Respondent No. 2 was called upon to obtain an activity chart so that progress of the project could be monitored and delays, if any, could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a change in the terms and conditions, post the payment of license fee by it. 4.7 Respondent No. 1, however, vide the impugned letter dated 09.07.2010 rejected its request for refund of the license fee. The sum and substance adduced from the involved reasons given therein, was that, the petitioner by first entering the fray and thereafter withdrawing, had blocked interested bidder (s) and therefore, was not entitled to the refund of, one time license fee, paid by it. 4.8 In so far as the petitioner was concerned, there was no further movement though it did discover that DRL had been refunded the license fee paid by it. In this behalf, the petitioner has placed reliance on a response dated 01.09.2010 issued by respondent No. 1 to a query raised by one Sh. Shobhit Mishra. 4.9 In the meanwhile, respondent No. 1 apparently issued a fresh advertisement, on 07.04.2011, inviting EOIs. This time around, however, respondent No. 1 permitted multinational companies to participate in the bidding process and also indicated that they would be allowed to process 200 MTs of Indian opium, which was, one of the demands of the petitioner. By this advertisement, applicants were also asked to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd was placed on the provisions of Section 64 and 65 of the Contract Act and the following judgments:- (i). De-Smet (India) Private Limited Vs. B.P. Industrial Corporation (P). ltd., AIR 1980 All. 253 (Page 9-11, and 13) and (ii). Surendranath Talukdar and Ors. Vs. Lohit Chandra Talukdar, AIR 1975 Gau. 58 (para 10). 7.4 The petitioner had paid the license fee as consideration for the privilege that GOI was to extend to it to process the opium. What the petitioner obtained as a matter of fact was a permission to set up a facility/a factory. The contract fell through at this stage; albeit prior to issuance of license to process the opium. Respondent No. 1 must, therefore, return the benefit received even if the petitioner was in breach of the contract. 7.5. The reasons given in the impugned letter dated 09.07.2010 were not sustainable, in as much as, the allegation that it had blocked the issuance of license for as long as it wanted to and then backed out of the process and claimed refund, was not sustainable. It was contended that, such a charge could have been levied if there was an entity available other than the petitioner to fill the void caused on EBPL withdrawing fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll defences would be available to the respondents. 8.1 It was contended that it was the petitioner which had failed to perform its obligations in line with the terms and conditions stipulated under the contract. The lis, between the parties, did not arise out of the public law functions of the State but related to contractual obligations obtaining between the parties. The petitioner was not entitled to recovery of money paid in the form of license fee under any statutory provision/rule and therefore, no mandamus could be issued in the facts and circumstances of the present case. 8.2 The one time license fee paid by the petitioner for procuring permission to set up a factory to process Indian opium to derive alkaloids and APIs, was not money paid which had attributes of earnest money, advance deposit and/or security. The said lump sum amount was consideration paid by the petitioner for grant of license/permission of the respondents to part with their right to undertake processing/manufacture of Indian opium. 8.3. I must, however, point out that in the written submissions filed on behalf of the respondents on 08.02.2013, the respondents have taken a stand that the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ua the maintainability of the writ petition by adverting to the following arguments. Firstly, it is the case of the petitioner that the stand taken by respondent No. 1 of refusing to refund the license fee was violative of Article 14 being: arbitrary, discriminatory, unreasonable and unfair; and it is in the context of considering this question, that the terms of contract entered into between the parties would have to be examined by the court. 9.2 Secondly, the contract in issue was a statutory contract, which was governed by the provisions of Section 10 of the NDPS Act. The license, if issued, would have been issued under Rule 36(2A), and thus, was amenable to the jurisdiction of this court. The refund of license fee to DRL, while forfeiting the license fee paid by the petitioner, was a clear pointer to the fact that the respondents had acted arbitrarily, and in a discriminatory manner, in violation of the provisions of Article 14 of the Constitution. Similarly, EBPL was permitted to withdraw from the bidding process without being penalized. EBPL was fortuitous in as much as, when it withdrew from the process it had not even deposited the license fee. These actions of the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. EBPL, which was the highest bidder, offered ₹ 18 Crores as one time license fee, while DRL, which was, the second highest bidder, offered ₹ 15.66 Crores. At this stage, the petitioner had offered only a sum of ₹ 11.01 Crores. 10.5 GOI accepted the recommendations of the Committee, which was communicated to all concerned including EBPL and DRL vide its OM dated 11.03.2008. As per the terms stipulated for submission of bids, in particular, clause (m), DRL revised its financial bid to equal that of the highest bidder. Accordingly, this was communicated by DRL on 05.11.2007 prior to the issuance of OM dated 11.03.2008. At this stage, the petitioner was not in the fray and hence, no communication was sent to it. 10.6 By another OM i.e., dated 12.03.2008, EBPL and DRL being the successful bidders, were communicated other terms and conditions. 10.7 The aforesaid was followed by communication dated 05.05.2008 which was exchanged between respondent nos. 1 and 2; copies of this communication was, however, sent only to EBPL and DRL. What is important is that in this communication, respondent No. 1 accepted the position that license for processing opium by respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced by the learned ASG in court. A reading of the letter dated 30.03.2009 alongwith letter dated 06.05.2009 would show that admittedly, a show cause notice was issued on 07.06.2008 to DRL to which a reply dated 17.07.2008 was filed by DRL. 11.4 Both the show cause notice and the reply have not been produced in court; though by letter dated 06.05.2009, not only did respondent No. 1 cancel the approval granted to DRL vide OM dated 11.03.2008 but also directed refund of ₹ 18 Crores submitted by it on behalf of Macred. As a matter of fact, respondent No. 1 directed respondent No. 2 to take urgently, necessary action, to move the Ministry of Finance, Department of Revenue, so that requisite provision could be made in the budget, if required, to process the refund. The reason accorded for not issuing a license in the name of Macred was that, at the time when the bid was made by DRL, Macred was not in existence. I am not getting into the legal niceties of whether such a reason, if factually correct, can be sustained, though it is not unknown to law that promoters of companies do enter into pre-incorporation contracts. 11.5 Respondent No. 1 seems to have accepted the reason sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt, in more recent cases, that even while exercising contractual powers, the State is bound to act within the realm of Article 14 of the Constitution. In other words, if parties claim rights under a contract to which a State or its instrumentality is a party, a remedy by way of writ petition would not be shut out only because it seeks to enter the contractual field. 14. Notably, there is not even a suggestion either in the impugned letter or in the counter affidavit filed on behalf of the respondents that cancellation of the permission granted to the petitioners to set up a factory had resulted in a damage or injury to them. The reason perhaps, for not making such an assertion is obviously that it had permitted EBPL to withdraw from the process, after having accepted its bid, without seeking to even contend that it would recover loss or damage caused to them by its action. DRL's case was, on the other hand, if at all, worse in that, permission was given to it to withdraw from the process after its bid has been accepted and license fee received. The u-turn which DRL was permitted to take was sought to be explained by adverting to the fact that while paying the license fee, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , both by EBPL and DRL, and in fact facilitated it by conveying their cancellation for grant of license to these entities vide letters dated 04.06.2008 and 06.05.2009. It is quite possible that, since no injury or harm was caused to the respondents by virtue of the withdrawal of EBPL and DRL, it chose not to assert or take any punitive action. 14.5 Is the position any different vis- -vis the petitioner; evidently not. The petitioner seeks to withdraw from the process; albeit after the acceptance of its bid on the ground of commercial and economic unviability. As indicated above, there is no assertion of any harm or injury; in the impugned letter of rejection. The only assertion in the impugned letter is that the petitioner's offer not to pursue with the permission granted to set up the factory could not be accepted for the reason that it had blocked the chance of another entity; I would assume, to get into the fray. Whether or not, this was a tenable explanation, is not relevant in these proceedings, what can, however, be unreservedly said, is that, it stopped short of saying that harm and injury had been caused to it. If that assertion is not made, what, has to be examined ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... setting aside the assessment orders, exercised their jurisdiction in proper circumstances to order the consequential relief for the refund of the tax illegally realized. We do not find any good reason to extend this principle and, therefore, hold that no petition for the issue of a writ of mandamus will be normally entertained for the purpose of merely ordering a refund of money to the return of which the petitioner claims a right... (emphasis is mine) 15.2 It may be pertinent to note in the same judgment (Suganmal's case) the Supreme Court in paragraph 11, while agreeing with the observations made in the judgment in the case of State of Madhya Pradesh Vs. Bhailal Bhai alluded to two situations by way of illustration when, exercising power under Article 226 a High Court may refuse to give consequential relief. The two instances referred to were: where there was unreasonable delay in approaching the court or, where prima facie triable issues were raised as regards merits, such as, limitation etc. 15.3 Suganmal's case has been explained and distinguished in several subsequent judgments of the Supreme Court including U.P. Pollution Control Board Vs. Kanoria Industria ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 19). 15.6 Therefore, the court clearly was of the view that there was no absolute rule barring it from entertaining a writ petition involving disputed questions of fact even if they arise out of contractual obligations. It is really for the court to consider: whether it could be convenient to decide the issue based on affidavits or, was it a case, which was fit for relegating the parties to alternative remedies including that by way of a civil suit having regard to the facts obtaining in a particular case. The requirement of oral testimony and trialability of a defence raised, are issues that the court could take into account in relegating parties to an alternate and efficacious remedy. Apart from anything else, in ABL's case the court refused to relegate the party to a civil suit having regard to the fact that the petitioners claim before it was rejected in May, 1997 and by the time the case reached the Supreme Court, it was nearing the end of 2003. 16. In the context of the above, I must also refer to yet another judgment of the Supreme Court in the case dealing with contract of insurance wherein a Division Bench of the Supreme Court, in paragraph 11 at page 167 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f each case. The position as it obtains today is that, a mandamus can be issued for recovery of money, provided it is a consequential relief. 18. Applying the law to the facts obtaining in the present case, I am inclined to agree with the petitioner that a writ would lie, even though the dispute has its genesis in a contract. There is, as indicated above, no dispute on the material facts. The question which arises for consideration is a question of law which is whether in the absence of a clause for forfeiture obtaining between the parties, the money could be retained by the respondents, especially, in the circumstances that no harm or injury is pleaded, and similarly circumstanced entities, have been allowed to exit from the contract. I would deal with this a little later as this is an issue on merits. 18.1 Let me deal with another question which relates to the efficacy of the petition. The question is: could the prayers sought in the writ petition be granted. In this case, the principal prayer is to seek a direction for quashing the impugned letter dated 09.07.2010. 18.2 The impugned letter was in response to the petitioner's letter of 20.05.2010 wherein, the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt. As long as the contract is not performed, earnest money or security deposit, stands out as a guarantee for ensuring due performance. Once the contract is performed, earnest money paid would ordinarily get adjusted against the payment to be made under the contract. In that sense, earnest money is paid under a contract of security which is distinct and separate from the real or pure contract. Therefore, the right to forfeit earnest money arises under the Contract of Security which could be provided explicitly or impliedly. Thus, if the payment made was in the nature of earnest money or security deposit for due performance of the contract, which it is not, it would have perhaps made little difference to the right claimed by the respondents to retain the license fee even if there was no forfeiture clause. The fact is that ₹ 18 Crores was paid by the petitioner to the respondents to obtain a license for processing Indian opium to be supplied by them. In these circumstances, could it be said that the respondents had the power to retain the amount in the absence of the contract providing for a clause of forfeiture. In my opinion, the respondents, clearly could not have retained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dents by emphasizing that it was a matter involving civil proceedings. Would that by itself change the position in law, and should I, therefore, on this specious argument raised before me by the respondents, in a situation where there is no dispute as to the core facts, relegate parties to suit. I think not. 20. At present, at best that can be said vis- -vis the respondents is that while they were willing to do all that which was required under the contract, the petitioner had reneged on its obligations. There was thus, an alleged failure, on the part of the petitioner to perform its obligations under the contract. Would such an allegation, even if, it is assumed to be correct, enable the respondents in law to retain the money without demonstrating that harm and injury is caused to them. The respondents can only do so by instituting an action before a proper forum and establishing its claim. Admittedly, to date, no such steps have been taken even to initiate a claim. It is well established that a mere allegation does not give rise to any liability unless it is duly established in accordance with the law. All that the respondents can hope for, at this stage, is to press a claim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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